Financial Transparency Coalition

About fifteen years ago, the leaders of the world convened at the Millennium Assembly of the United Nations. In the year 2000, at the turn of the century, the world’s leaders adopted the United Nations Millennium Declaration, a commitment to dramatically reduce poverty worldwide. All 193 member states of the United Nations and 23 organizations agreed to achieve the following set of goals:

1. Eradicate extreme poverty and hunger;
2. Achieve universal primary education;
3. Promote gender equality and empower women;
4. Reduce child mortality;
5. Improve maternal health;
6. Combat HIV/AIDS, malaria, and other diseases;
7. Ensure environmental sustainability; and
8. Develop a global partnership for development.

The nations set a deadline for these goals: 2015. With that year only a few weeks away, it is now time to ask: how well has the world fared in trying to achieve these lofty goals?

In short, progress has been mixed. Many countries, particularly those in Asia, have made tremendous progress toward achieving these goals. China reduced its number of extreme poor by 81 percent, El Salvador has reduced its child mortality rate by 87 percent, and the Democratic Republic of the Congo increased its primary school enrollment from 49 percent in 1991 to 61 percent in 2010. Among low-income countries, Sri Lanka, Bangladesh, and Niger have produced dramatic improvements in nearly all of the goals.

At the same time, however, many countries—in particular in Africa—are falling short of these expectations. Many nations, for example, are not on track to halve poverty, and their overall progress on reducing hunger has been slow at best.

The recent annual UN report on Least Developed Countries explains that much of this has been the result of an insufficient focus on these nations’ productive capacities. Productive capacity is the basis for economic stability and self-sufficiency. It includes basic human and economic development capacities—such as transportation, infrastructure, and domestic finances—that promote sustainable economic development

One of the major ways to address productive capacities of these nations is domestic resource mobilization—the most sustainable source of funding in the long-term. Domestic resource mobilization depends on sustainable sources of taxation and domestic revenues. On average, Least Developed Countries (LDCs) have a ratio of tax revenues to GDP that is two to three times lower than the ratio among developed and advanced economies. Among other solutions, developing countries can mobilize domestic resources by curtailing illicit financial flows, abusive transfer pricing, and tax evasion.

As we move into the end of MDG era, the United Nations has already begun a vision for development post-2015. For the last two years, the UN’s Open Working Group has been working to develop the Sustainable Development Goals. The group’s vision will form the basis for the formal government negotiations, which will begin in January of next year. By September, we can expect to have a new global framework outlined in the Post-2015 summit.

This new global framework must include a promise by wealthier nations, particularly those with opaque financial systems who facilitate these practices, to be partners in reforming the international financial system. It should explicitly, and concretely, advance global solutions to sustainable development that emphasize domestic resource mobilization. Finally, and most importantly, it should recognize the important role of the international community in reducing illicit financial flows and tax evasion from developing countries and make concrete promises toward reform.